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NSW Civil or Criminal Fraud and Report to Police?

Discussion in 'Commercial Law Forum' started by Winnet222, 6 March 2015.

  1. Winnet222

    Winnet222 Active Member

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    I was buying a business from a friend that I knew, (I described it on my last post).

    So I was provided the company's extract from ASIC, and he turns out to be no one inside the company (not one of the company directors, nor a shareholder as he claimed he owned half of the company), and now he holds my money, and he denied or refuse to give it back.

    Is this counted as a civil fraud or criminal fraud? Is it a fraudulent misrepresentation? Can I report him to police?

    Thanks
     
  2. Sarah J

    Sarah J Well-Known Member

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    Hi Winnet222,

    Yes, you can report him to the police. You could look at both civil and criminal fraud as well as misrepresentation (both civil and criminal). The difference between civil and criminal is that they require different burdens of proof to be met (i.e. criminal fraud is harder to prove than civil fraud). Further, they have different penalties (e.g. imprisonment vs. compensation). Best to speak with a lawyer about this as financial crime can get complicated.
     
  3. Winnet222

    Winnet222 Active Member

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    Hi Sarah J,

    Thanks for your reply,

    I have reported him to police and based on evidences, he could be charged as a criminal fraud, but if he paid me back my money, could I withdraw the charges?

    I will also go to see my lawyer on Monday.
     
  4. Sarah J

    Sarah J Well-Known Member

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    Hi Winnet222,

    You can withdraw the charges at any time. However, this might not prevent the police from continuing with the investigation/prosecution. Though, in practice, the police might drop the case as they have so much other work on their plate.
     
  5. Winnet222

    Winnet222 Active Member

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    Hi Sarah,

    If the actual director of the company which own the business claimed that he has money, and he uses/spent my money (shares) and refuse to provide any statement for the whereabout of my money, will he face imprisonment under director fraud law?

    Is this criminal or civil? Should I report this matter to police as well or sue him in court?

    Thanks
     
  6. Sarah J

    Sarah J Well-Known Member

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    Hi Winnet22,

    If the seller (whether or not he is the current director of the company) takes your money in exchange for the promise to give your shares in the company and later misappropriates the money, you have a good cause of action against him (e.g. misrepresentation; misappropriation of funds for financial gain).

    Even if he is a director, your contract with him has nothing to do with him and the company, therefore, he will not have breached a fiduciary duty to the company and so, won't have breached directors' duties. Further, only the company and existing shareholders (on behalf of the company) can sue a director for breach of fiduciary duty as this duty only extends to them.

    You have a personal action against the seller. You can report him to the police or you can take this up in civil court (personal action). The police may not prosecute him depending on how much evidence they have against him (remember, the criminal offence requires a higher burden of evidence than the civil) and other public interest factors. If you want the money back, it is best to start civil action against him since if you are successful in civil trial, you will be awarded compensation.
     
  7. Winnet222

    Winnet222 Active Member

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    Hi Sarah, how have you been?

    Just a quick update, the director (first defendant) has claimed bankrupt now.. and now I am in process of getting my money back from the second defendant who is his partner in business.

    The second defendant is also the man whom I gave the money to, and was the one who actually talk me into buying the business. His name wasn't listed in ASIC as a director/shareholder but I can prove that he is actually the owner too.

    Now, the matter is listing for motion as he claimed that he is merely a witness during the contract exchange. My understanding is, I should prepare an affidavit for the registrar? Is there anything else which I need to present during the motion?

    And if I have a witness, how can I apply for her to be my witness during the hearing?

    Thanks a lot Sarah. Any advice will be appreciated.
     
  8. Sarah J

    Sarah J Well-Known Member

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    Hi Winnet222,

    I'm well thanks. Thanks for updating us on the progress of your matter.

    To answer your questions:

    1. A rule of thumb: if you want to rely on any facts, argue any fact or event, you should put this in an affidavit and submit it to court (and all defendants). So, I would say, yes, best to make an affidavit if you later wish to argue any facts. If there are documents that support your facts, you should refer to them in your affidavit (when you're introducing the fact) - example: On 30 June 2014, the second defendant contacted me by email and ask me to join this venture. A true copy of this email is produced and shown to me as "exhibit [your initials] - 1". You then attach the document to the back of the affidavit, head it (e.g. "Exhibit AB-1") so that it is also submitted to court and the other side has a copy. The affidavit then becomes part of your evidence.

    2. If you wish to call witnesses, you should let the registrar know. You also need the registrar to issue a summons (notice to appear for a court hearing) which sets out the date, time and place for the witness to appear. Otherwise, you can just get them to give written evidence but writing a witness statement/affidavit and submitting this to court (and the defendants).
     
  9. Winnet222

    Winnet222 Active Member

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    Hi Sarah,

    Thanks a lot for help. I will follow your rule of thumb for my affidavit.

    The case is adjourned until early August, since the defendant went back overseas and his solicitor is not sure yet when he will be back.

    Sarah, I would like ask, if they failed to file the notice of motion to dismiss my claim after the final adjourned date, what will happened?

    Will I win the case straight away or do I still need to present my claim on the main hearing? Because I heard the Registrar said that by the date, if they still have not filed the notice of motion, that means they lost their chance of filing a motion.
     
  10. Sarah J

    Sarah J Well-Known Member

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    Hi Winnet222,

    Once you serve the defendants with the initiating claim (statement of claim), they have a limited time to respond. If they do not within this time, you can apply for default judgment. In this case, the court will look at your evidence, without the benefit of any rebuttal or response from the other side. Therefore, the court will assume that what you have stated is the true version of events. The court will consider the strength of your case based on this and come to a decision. If your case has merit, the court will order in your favour "ex parte" (meaning, without the other side present). You can then take enforcement action.

    However, the other side, once notified of default judgment entered against them, may apply to the court to have the default judgment set aside. They will need to show (i) why they did not respond within the time frame, (ii) if there is delay between when they found out about the default judgment and bring forth the application to set aside, then explain the delay, (iii) that there is no prejudice to you, or any other parties involved from setting aside judgment, and (iv) that they have a good defence/response to your case.

    If the default judgment is set aside, the court will grant a time period in which a defence needs to be lodged and the trial will proceed as usual.
     

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